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Motorists will be better off to the tune of $135 a year on average under ACC levy cuts confirmed yesterday but levy reductions for workers and employers recommended by the corporation have again been sacrificed to help the National Government balance the books.

Prime Minister John Key yesterday announced the Government's Budget plan for $480 million of cuts next year would go ahead. About $432 million of that will come from motor vehicle levy reductions including a 3c a litre petrol tax cut, and reductions in vehicle licensing fees based on the safety rating of the vehicle.

The balance of the reduction comes from a cut to the work account levy paid by employers and self-employed people from 95c per $100 of liable earnings to 90c.

However, ACC itself had recommended $658 million in cuts including a 20c reduction in the work account levy and a 6c per $100 of earnings cut to the earners account levy paid by employees as well as the motor vehicle levy reductions.

ACC Minister Judith Collins was upfront about why the Government had ignored ACC's recommendation for bigger cuts for the third year running.

"It's because we need to get to surplus and we're very honest about that.

"We've been very clear that we believe the surplus is something that is very important for not only the Government but also for every business that has to borrow money."

Ms Collins said the Government was able to cut levies partly because "we've been able to decrease the amount of people on long-term benefits from 11,000 to 8000".

"If there was a change of Government and we went back to the same old be-on-ACC-for-life-type situation that we inherited, then it could be turned around."

ACC's recommended cuts are underpinned by the fact that work and earners accounts are now fully funded, meaning they have sufficient money to meet the future cost of all their existing claims. Without the recommended cuts, ACC will be collecting more money than it requires, leaving it with the headache of what to do with the excess cash.

Reducing the leviesThe Government's cuts:41% reduction in the combined motor vehicle levy totalling $438 million a year.5% reduction in the work levy totalling $42 million a year.ACC's recommended cuts last month21% reduction in the work levy totalling $162 million a year.40% reduction in the combined motor vehicle levy totalling $427 million.5% reduction in the earners levy totalling $69 million.